In anticipation of the various scenarios that may arise if President Donald Trump’s threat to withdraw from the Joint Comprehensive Plan of Action (JCPOA) materialises, the European Union may establish regulations to protect its firms that do business in Iran from US sanctions.

In order to keep their own pledge to remain committed to the JCPOA, the EU must find ways to limit the impact from possible US extraterritorial sanctions against EU companies.

Blocking regulations

According to Denis Chaibi, head of the Iranian taskforce at the EU External Action Service, the EU is looking at a system of ‘blocking regulations’ to protect its firms. ‘It is not complicated to do it legally, in that the legal instrument exists but it doesn’t require a huge internal debate,’ Chaibi told a Euromoney conference in Paris.

Blocking regulations were agreed in 1996 as a countermeasure to US extraterritorial economic sanctions against Cuba, which EU governments argued benefited US foreign policy interests at the expense of European sovereignty.

The regulations could serve as part of a suite of political, legal, and commercial measures that European governments could employ to protect their businesses from the consequences of snapback sanctions. Ellie Geranmayeh of the European Council on Foreign Relations believes that the threat of reviving blocking regulations can in itself be a useful political tool for Europe, to create a cost for the Trump administration and make it think twice about its actions.

Blocking regulations may be only partially effective for major multinationals, but they can provide an avenue for small and medium-sized enterprises in Europe and Asia with little or no US exposure, and sanctions, to continue conducting business in Iran in non-dollar currencies.

This analysis segment is taken from our monthly Iran Strategic Focus report produced by our in-country and in-house teams. If you would like to discuss the analysis, or have any queries on Iran, then we would like to hear from you.